Presentation to The Social Development Portfolio

CommitteeParliament

Cape Town8 November 2006

1. Background (CEO)

2. Performance against targets (CEO)

3. Annual Financial Report (CFO)

4. Report of the Auditor-General (CFO)

5. Projects Report (PD)

6. Human Resources (HRD)

7. Way Forward (Corrective Measures) (CEO)

8. Questions and comments (Members) the Portfolio Committee

STRUCTURE OF THE PRESENTATION

BACKGROUND

A. Key parts of the Annual Report are: Overviews by the Minister; Chairperson of the Board and the CEO Emphasis from Minister and Chairperson of the Board: Strategic importance

of the NDA within the context of the country to achieve Millennium Development Goals and reduce poverty by half by 2014.

In addition: Turning around and building the institutional capacity of the NDA in order to

deliver on its mandate. Performance assessment based on the original Strategic plan approved by the

Minister prior to the appointment of the CEO. Performance assessment based on the performance agreement between the

Board and the CEO which was entered into on his appointment and which contained 13 priority goals. – See pages 31 to 51 of the Annual Report for all the Performance Information

B. Historical legacy of the organisation: Chronic problems which led to ministerial intervention October 2003 support

BACKGROUND

B. Historical legacy of the organisation:

Chronic problems which led to ministerial intervention in October 2003

• Forensic Audit which led to the suspension and subsequent resignation of the previous CEO

• None of the NDA’s previous CEOs have served their full term of office.

• Appointment of new board on 5 December 2004.• Lack of good corporate governance, culture and practices.• Inability to disburse committed fund and meet its mandated

obiligations.

BACKGROUND

Upon appointment of the new CEO on 1st June 2005, the following challenges / problems were identified through CEO provincial visits, the commissioning of an independent culture survey and a business processes review:

Backlog of unresolved labour relations cases including those of the previous CEO and COO.

Lack of common strategic direction and leadership. Lack of performance culture and management systems• Huge backlogs in payments to funded projects.• Weak and inadequate systems of monitoring and evaluation for

projects.

BACKGROUND

• No properly updated database of NGO’s and CBO’s as prescribed in the NDA Act.

• Weak reporting and document management systems.• Negative credibility and perceptions about the NDA among

stakeholders and the public.• Weak administrative systems.• Non-alignment between organisational structure, people and

strategy.• Low levels of appropriate skills and competencies throughout the

organisation to achieve its goals.• Weak corporate governance systems and capacity.• Problems regarding projects management; contract

management; procurement systems and delegation of authority.

BACKGROUND

• No clear programme of capacity building for CBOs and NGOs as mandated by the NDA Act.

• No updated strategically aligned approved organisational structure

POVERTY STATISTICS

• Levels of Poverty

• The current estimates of poverty by HSRC show that the proportion of people living in poverty in South Africa is as follows:-

Approximately 57% of individuals in South Africa were living below the poverty income line in 2001, unchanged from 1996.

This translates into 26m people being classified as poor.

POVERTY STATISTICS

Province No. of poor persons (million)

%of population in poverty

Poverty gap (R billion) Share of poverty gap

Eastern Cape 4.6 72% 14.8 18.2 %

Free State 1.8 68% 5.9 7.2 %

Gauteng 3.7 42% 12.1 14.1%

Kwa-Zulu Natal 5.7 61% 18.3 22.5%

Limpopo 4.1 77% 11.5 14.1%

Mpumalanga 1.8 57% 7.1 8.7%

North West 1.9 52% 6.1 7.5%

Northern Cape 0.5 61% 1.5 1.8%

Western Cape 1.4 35% 4.1 5.0%

South Africa 25.7 57% 81.3 100.0%

Table 1. Poverty Distribution by Province

Poverty Distribution by Province

PERFORMANCE AGAINST TARGETS

A. Strategic Focus for the year:

As as result of the chronic historical problems and crises, the programme of action inevitably focused on organisational

transformation and implementing a turn around plan.

B. Highlights: Measured against agreed performance targets, and operating under difficult circumstances of transformation the orgasation has been highly successful in:

Developing a widely canvassed five year strategic plan which gives proper direction. It has a theme of Unlocking potential

PERFORMANCE AGAINST TARGETS

Building organisational stability by establishing proper policies and systems for managements.

Building organisational stability by establishing proper policies and systems for managements.

• Commissioning a business process review and culture assessment and implementing recommendations to improve organisational performance

• Improving communication with stakeholders through extensive consultations on strategy and feedback through extensive meetings in the provinces

• Improving the turn-around time for projects payments after Board approval e.g. eliminating the payments backlog by paying 84 long outstanding unpaid projects a total of R28 200 000

• Improving on corporate governance compliance through systems and capacity building as demonstrated by the Internal Audit assessments)

PERFORMANCE AGAINST TARGETS

• Developing an integrated human resources strategy which is properly aligned to the strategic plan of the organisation for implementation.

• Developing a risk management plan for the organisation (31 March 2006)

• Implementation of technology aligned with organisational business needs in accordance with the IT strategy.

• Improving on corporate governance compliance through systems and capacity building as demonstrated by the Internal Audit assessments.

• Establishing governance frameworks and processes for the Board and management structures as evidenced by the Board Charter, the Board Protocol and the Terms of Reference for the Board Committees, Exco and Senior Management Team

PERFORMANCE AGAINST TARGETS

• Approval of one hundred and four (104) projects valued at sixty eight comma seven million rands (R68,7m) to benefit more than seventy thousand (70 000) people directly and over two hundred and seventy eight thousand ( 278 000) people indirectly.

Disbursement of over sixty two million rands (R62m) of grant money for projects.

Implementing capacity building projects for CSOs valued at over one million rands (R1m)

Starting negotiations with the European Commission for funding in order to mobilise resources for poverty eradication.

Significantly, the organisation has achieved over eighty five percent (85%) of its targets in terms of the CEO’s performance agreement with the Board.

PERFORMANCE AGAINST TARGETS

Significantly, the organisation has achieved over eighty five percent (85%) of its targets in terms of the CEO’s performance agreement with the Board.

When measured against the original strategy, over sixty percent (60%) of targets were met or partially met.

ANNUAL FINANCIAL REPORT

The report will cover

• Statement of Financial Performance

• Statement of Financial Position

• Report of the Auditor-General

2006 2005

INCOME 172 713 532 141 376 167

Grant 121 482 000 125 587 590

Interest 15 816 471 13 831 372

Other 35 415 061 1 957 205

EXPENDITURE 124 062 814 156 227 498

Direct Funding 55 668 925 90 180 382

Programme Support 3 685 324 7 265 356

Staff cost 33 364 954 31 005 865

Administration cost 27 775 895 27 775 895

Net (deficit)/surplus for the year 48 650 717 14 851 331

STATEMENT OF FINANCIAL PERFORMANCE

STATEMENT OF FINANCIAL POSITION

ASSETS 2005

Property, plant and equipment 2 063 030Current assets 259 894 616Cash & cash equivalents – Government 241 347 911Cash and cash equivalents –European 15 066 058Accounts receivable 3 480 647TOTAL ASSETS 261 957 646

Funds & Liabilities 100 903 539Funds 46 562 054Development Fund 49 842 188Projects Fund 4 499 297Current liabilities 104 472 581Accounts payable 5 653 733Committed projects 150 824 400Interest payable – European Community 4 575 974

2006

2 496 332264 742 848249 217 694 12 239 987 3 285 167267 239 180

148 779 338 46 562 057104 472 581 (2 255 297)118 459 842 2 950 044110 333 935 5 175 863

REPORT OF AUDITOR-GENERAL

MATTER

Alleged misappropriation of funds

MANAGEMENT PROGRESS

During the annual audit, irregular payments were identified;

Fraud charges were laid against a junior accounts clerk for the alleged misappropriation which is currently estimated to be R8.8 million;

The accounts clerk allegedly involved is in jail pending a bail application;

Forensic auditors engaged to investigate the alleged fraud have produced a draft interim report;

REPORT OF AUDITOR-GENERAL

MATTER

Contracts for 2 projects for

R3 649 162 not be submitted

by the NDA.

A contract for a project for

R799 112 was not signed by

both parties

No adequate filing / project management system.

MANAGEMENT PROGRESS

One contract for R3 489 122 was located and the other contract for R160 040 was destroyed in the fire.

Contract referred to by the A-G was in the process of being finalised by the NDA and had not yet been submitted to the NDA signatory for signature. The project had not been paid.

Updating of a filing register is underway and the project management system is being enhanced in conjunction with the introduction of improved IT systems.

REPORT OF AUDITOR-GENERAL

MATTERAmounts written back from twocommitted projects did not agree with the approved amounts for those projects.

Six projects for R911 227 did notshow any financial movement on theNDA account for 7 months to 2 yearsand were not included in the projectswrite-back.

The existence of 6 projects for R7 170 947 could not be verified.

MANAGEMENT PROGRESSThe possibility of the difference being due to fraudulent payments is being investigated

A write back policy was approved during the month of July 2006 All the six projects will be recommended for write back/withdrawal if they meet project withdrawal criteria in accordance with the said policy

The NDA has verified that the six projects either exist or have been closed and external auditors are being contracted to confirm this.

REPORT OF AUDITOR-GENERAL

MATTER

Letters from 9 projects, confirming receipt of payments amounting to

R3 795 924 not submitted.

No proof of payment submitted for

7 projects for R1 669 134.

No independent reconciliation of payments to the individual project bank statements was performed.

General Ledger projects writebacks

of R20 066 537.

MANAGEMENT PROGRESS

Grant confirmation letters signed by the projects were subsequently submitted to the auditors.

Proof of receipt of payment has been obtained from all the projects and is on file.

Projects payments reconciliations are now sent to the Projects Department and include the EFT audit reports and monthly bank statement

This General Ledger amount has been written off with Board approval. No further action required

REPORT OF AUDITOR-GENERAL

MATTER

General Ledger trade creditor write backs of R1 400 000

Special conditions which had to be

met before funding could continue

were not evidenced in files and a

policy to ensure that special

conditions on projects are met before

payment is released, has not been

developed.

MANAGEMENT PROGRESS

This General Ledger amount pertaining to trade creditors has been written off with Board approval. No further action required

A process has been implemented to ensure that special conditions on projects are met before payments are released.

PROJECTS REPORT

Grant Trends / Allocations to the NDA

2001/2 2002/3 2003/4 2004/5 2005/6 2006/7 2007/8

R’m

% R’m

% R’m % R’m % R’m % R’m % R’m %

Grant

92.7

96.7

4%

103.2

7%

109 6% 121.5

11%

128.7

6%

135.2

5%

PROJECTS REPORT

• Commitments R68.7 million

• Disbursements R62.0 million

• Number of projects 104

NDA Funded Projects for the Year Ended 31 March 2006

PROJECTS REPORT

South African Government Grant Commitments: 2005/6Province Number of Projects

ApprovedAmount Committed per Province (R)

Limpopo 17 13 455 724

Mpumalanga 11 7 055 798

Eastern Cape 36 13 455 271

Northen Cape 4 3 880 568

Western Cape 8 5 759 286

KwaZulu Natal 15 12 169 884

North West 2 2 704 576

Free State 3 1 453 427

Gauteng 8 8 762 621

TOTAL 104 68 697 155

HUMAN RESOURCES

• NDA is demographically represented in all 9 provinces• It is operationally structured into a National Office and

9 provincial offices• Each provincial Office is headed by a Provincial

Manager who reports to the Development Management directorate.

• Each Province is also divided geographically based on districts with Development Managers (project specialists) responsible for the project management function at local level.

Demographic Overview

HUMAN RESOURCES

Executive EE Distribution at 31 March 2006

African Asian Coloured White

Male 3 0 0 1

Female 1 1 0 1

HUMAN RESOURCES

Human Resources historically has been an area where the NDA has experienced a large number of challenges. To create context for the progress that has been made, the most important of these issues are listed and included the following:

Background to Challenges

HUMAN RESOURCES

HR Challenges Existing as at 2003 needing to be addressed

• No HR strategy existed • Very few HR Information System

existed• Poorly designed HR policies • Audit opinion on poor HR

administration• No legal compliance with no

submission of an annual EE report, WSP and even occupational health insurance where not paid by the NDA.

• No remuneration structure existed including poor payroll management

• No employee support programmes existed

• No training and development plan or strategically aligned programme existed

• No Performance management system existed and performance was not measured at all

• A poorly aligned structure existed and very few positions where clearly defined with appropriately designed and documented Job Descriptions

• A large number of CCMA cases where pending

• The provident fund lost an unacceptable % of its value

HUMAN RESOURCES

Current Situation

All issues as listed have beenaddressed, with HR programmes and systems being put in place resulting inthe audit opinion successfully being removed over the period with only afew housekeeping matters being mentioned for the 2005 – 2006 year reviewed.

Multi-year programmes initiated during the 2005 – 2006 year include the:• Organisational redesign and

restructuring• Determination of human capital

readiness through organisational wide competency assessments

• Building of organisational capability

• Performance planning, enhancement, monitoring and evaluation